LaSalle hotel deal dead

South Bend Tribune/MARGARET FOSMOE, file The interior of the LaSalle Hotel is shown in this photo from October.

SOUTH BEND -- The Redevelopment Commission today agreed to return $4,000 in earnest money to Mavcon Properties, a Kalamazoo-based company that had planned to buy and renovate the former LaSalle Hotel downtown.

Mavcon entered into an agreement to buy the vacant nine-story hotel from the city for $5,000 in June 2011, intending to convert it into an apartment building featuring 45 to 65 market rate apartments and ground-level retail space.

It provided the city with $2,000 in earnest money at the time and another $2,000 later.

For various reasons, however, the project never took off, and the agreement expired in October of last year.

Speaking to The Tribune at the time, Don Inks, the city's director of economic development, said it came down to parking. He said Mavcon wanted the city to build a parking garage next to the hotel, but the city could not justify the expense, estimated at between $1.8 million and $2.6 million.

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"It's that old cost-benefit analysis," he said.

On Thursday, however, Scott Ford, the city's executive director of Community Investment, said property taxes also were an issue.

"There was a misunderstanding about the availability of tax abatements in Indiana versus Michigan," Ford said.

He said Mavcon thought it could apply for a 10-year abatement and that it would not have to pay any property taxes on the building during that time, not knowing that in Indiana, as opposed to Michigan, such generous abatements are not available.

In addition, Ford said, the way the financing for the project was being structured was very complicated, involving a lot of different tax credits.

That said, the city remains in contact with Mavcon, Ford said, and the company, for its part, remains interested in the property -- as do other potential investors.

In the meantime, he said, the city plans to commission a market rate housing study for the downtown area, which should give potential developers a better idea as to the demand for such housing downtown.

"I'm still very positive about the immediate future of the LaSalle Hotel," Ford said.

In other business today, the Redevelopment Commission approved a contract with North American Signs to remove signage related to the College Football Hall of Fame, including the stone monument on St. Joseph Street, the pennants around the building and gridiron and the goal post.

Action has already been taken to remove signage related to the hall around town and on the Indiana Toll Road, city planner Bill Schalliol said.

Schalliol said the items will go into storage for now, until they can be sold or re-used.